Encouraging Energy Efficiency: Product Labels Facilitate Temporal Tradeoffs David J. Hardisty, University of British Columbia Yoonji Shim, University of British Columbia Daniel Sun, University of Calgary Dale Griffin, University of British Columbia SCP 2017, San Francisco

Co-authors Dale Griffin Yoonji Shim Daniel Sun

The “Energy Paradox” Price: $0.97 Price: $17.99 Watts: 60 Watts: 13 People are so “dumb” about this choice that many state governments have made inefficient light bulbs illegal. As choice architects, we don’t like this. Price: $0.97 Watts: 60 Lumens: 820 Price: $17.99 Watts: 13 Lumens: 800 (Saves $188 on energy over lifetime of the bulb)

Consumer don’t know? Or don’t care?

Previous Findings People don’t know? People don’t care? Education changes knowledge, not choices (Abrahamse et. al 2005) Energy efficiency labeling changes attention, not choices (Kallbekken, Sælen, & Hermansen 2013; Waechter et al., 2015) …but operational cost labeling DOES influence choices, especially if you scale up the metric (Camilleri & Larrick, 2014; Min et. al, 2014; Larrick & Soll 2008) People don’t care? People have really high discount rates (Frederick et. al, 2002) For real-world energy choices, too (Hausman, 1979) …but discount future losses less than future gains (Thaler, 1981; Hardisty & Weber 2009)

Our Nudge: 10-year energy cost

Our Nudge: 10-year energy cost

Our Nudge: 10-year energy cost Why does it work? Multiple reasons, but in particular: Consumers have a latent goal to minimize long term dollar costs “10-year energy cost” labels activate this goal, leading to more energy efficient choices

Outline It works (Study 1a & 1b) …better than alternatives (Study 2) …via goal activation (Study 3 & Study 4)

Study 1a: Overview Partnered with local electric utility, BC Hydro Online survey of 147 residential energy customers in Vancouver Pairs of products: Light bulbs, furnaces, TVs, vacuums IV: Control information vs “10-year energy cost” DV: Proportion of energy efficient choices

Study 1a methods Price: $999.95 Estimated Electricity Use (W): 121 Standby energy consumption: 0.2w Brand: Samsung Size: 50” Resolution: 1080p Price: $749.95 Estimated Electricity Use (W): 181 Standby energy consumption: 0.4w Brand: Samsung Size: 50” Resolution: 1080p

Study 1a methods Price: $999.95 10-year energy cost: $600 Estimated Electricity Use (W): 121 Standby energy consumption: 0.2w Brand: Samsung Size: 50” Resolution: 1080p Price: $749.95 10-year energy cost: $1,000 Estimated Electricity Use (W): 181 Standby energy consumption: 0.4w Brand: Samsung Size: 50” Resolution: 1080p

Study 1a: Results

Study 1b: Field Study

Study 1b: Methods Run in 5 drug stores over 6 weeks Two types of lightbulbs on store endcaps: 72w Halogen bulb (2-pack) for $4.29 23w CFL bulb (2-pack) for $12.99 Labels switched once per week, counterbalanced across stores DV: proportion of CFLs purchased 55

Study 1b Methods: Control Labels

Study 1b Methods: 10-year Energy Cost Labels

Study 1b: Results 12% 48% chose efficient option (n = 26)

Study 1 Discussion 10-year energy cost labels are effective Better than alternative labels?

Study 2: Goal Specificity

Study 2: Methods 1,155 Mturkers Lightbulbs only (same bulbs as field study) 1 (control) + 2 (positive vs negative) x 3 (dollars, kWh, % energy)

Study 2: Control Price: $4.29 Price: $12.99 Lumens: 1490 Lumens: 1600 Watts: 72 Number of bulbs: 2 Price: $12.99 Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: 10-year dollar cost Price: $4.29 10-year energy cost: $207 Lumens: 1490 Watts: 72 Number of bulbs: 2 Price: $12.99 10-year energy cost: $66 Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: 10-year dollars saved Price: $4.29 10-year energy saved: $81 Lumens: 1490 Watts: 72 Number of bulbs: 2 Price: $12.99 10-year energy saved: $222 Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: 10-year energy cost Price: $4.29 10-year energy cost: 1837 kWh Lumens: 1490 Watts: 72 Number of bulbs: 2 Price: $12.99 10-year energy cost: 586 kWh Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: 10-year energy saved Price: $4.29 10-year energy saved: 718 kWh Lumens: 1490 Watts: 72 Number of bulbs: 2 Price: $12.99 10-year energy saved: 1969 kWh Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: 10-year % cost Price: $4.29 Price: $12.99 10-year energy cost: 28% less Lumens: 1490 Watts: 72 Number of bulbs: 2 Price: $12.99 10-year energy cost: 77% less Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: 10-year % saved Price: $4.29 Price: $12.99 10-year energy saved: 28% more Lumens: 1490 Watts: 72 Number of bulbs: 2 Price: $12.99 10-year energy saved: 77% more Lumens: 1600 Watts: 23 Number of bulbs: 2

Study 2: Results

Study 2: Discussion Something special about future dollar costs Why? Perhaps a lifetime of practice and fluency Also an effect of attribute salience (or attribute counting) Let’s measure the process: Product goals Time horizon Improved information

Study 3: Measuring product goals

Study 3: Methods Similar to Study 1a, but ran on Mturk Added 1-year cost and 5-year cost conditions As you consider purchasing a new [TV], what product features are most important to you? Please list the three most important product features. When purchasing a new [TV], roughly how far ahead do you plan? [Then choice is made.] Please imagine that you purchased the [TV] above. How much do you estimate your household would spend on energy to use this [TV] in your home, over a period of 10 years? $_______

Study 3: Modelling Bulb TV Furnace Vacuum p r2 cost estimate .43 .00 .03 .02 .39 .87 planning horizon .002 .04 .22 .01 .59 .08 goal prominence <.001 .11 .06 .15

Study 3: Mediation Long-term cost goal prominence Energy efficient choices (β = 0.25, p < .001) 10-year cost labelling β = 0.15, p = .01

Study 3 Discussion 10-yr energy cost labeling is effective Why? Activates energy cost reduction goal (biggest r2) Improved cost estimation is NOT an important factor for influencing choices Attribute scaling (10yr vs 5yr vs 1yr) is also somewhat helpful But is “goal activation” really causing choices?

Study 4: Alternative goal activation

Study 4: Methods 184 MTurkers 3 conditions: control, 10-year cost, and subjective estimation. Subjective estimation condition [before choice] : "How many dollars do you estimate you would spend on energy costs to use product A, over a period of 10 years?“ $_______ "How many dollars do you estimate you would spend on energy costs to use product B, over a period of 10 years?“ $_______

Study 4 Discussion Subjective estimation has the same effect at 10-year cost labels Strong evidence that information provision is not a necessary condition

Conclusions 10-year energy cost labelling is an effective, low-cost way to increase energy efficient choices Works via goal activation (in part) Win-win Easy to scale up Similar to unit cost labeling

Thank You!